Crude-oil prices climbed Wednesday from their lowest finish in about a month, buoyed as U.S. crude supplies registered a larger-than-expected decline and as growing tensions between the U.S. and Iran raised the threat of disruptions to supplies in the Middle East.
Those price-bullish factors weighed against pressure from concerns that a protracted trade conflict between the U.S. and China would hurt energy demand.
West Texas Intermediate crude for June delivery CLM9, +1.38% was up 89 cents, or 1.5%, at $62.29 a barrel. The contract finished Tuesday at $61.40 a barrel on the New York Mercantile Exchange after nearing a retest of $60 intraday. Prices posted the lowest front-month contract finish since March 29, according to Dow Jones Market Data.
Global benchmark July Brent crude LCON9, +1.06% rose 38 cents, or 0.5% to $70.26 a barrel. The settlement Tuesday at $69.88 marked the lowest front-month contract settlement since April 4.
The Energy Information Administration on Wednesday reported that U.S. crude supplies declined by 4 million barrels for the week ended May 3. That was bigger than the fall of 2.2 million barrels expected by analysts polled by S&P Global Platts, though the American Petroleum Institute on Tuesday had reported an increase of 2.8 million barrels, according to sources.
The EIA data also showed that gasoline inventories were down 600,000 barrels, while distillate stockpiles edged lower by 200,000 barrels last week. The S&P Global Platts survey had shown expectations for supply declines of 980,000 barrels for gasoline and 1.05 million barrels for distillates.
On Nymex, June gasoline RBM9, +0.70% rose 0.4% to $1.957 a gallon and June heating oil HOM9, +1.22% added 1.4% to $2.065 a gallon. On Tuesday, both commodities posted the lowest front-month contract settlements since April 4.
“Oil prices are not having much fun in the current risk environment ...which shouldn’t come as much of a surprise considering global growth fears and their impact on risk are intrinsically linked to future oil demand,” said Craig Erlam, senior market analyst with Oanda. WTI and Brent oil both trade around 3% lower month to date.
“It’s one of the often more overlooked drivers of oil prices but the correlation is clear. Oil has been on a slide since Trump claimed to have called OPEC regarding oil prices, which came at a time when the market was already looking rather stretched to the upside,” Erlam said.
“We’ve seen a bit of a corrective move since [Trump’s comments on OPEC] — just shy of 10% — but that may increase. We’re currently trading at a very interesting level, around $69-70 in Brent and $60-61 in WTI, a break of which could signal more pain to come. Given the recent shift in risk appetite, this is perfectly feasible,” he said.
U.S. Trade Representative Robert Lighthizer said earlier this week that the Trump administration will increase tariffs on $200 billion in Chinese goods beginning early Friday and the administration took steps Wednesday to make that happen. The prospect of higher tariffs had been first raised on Sunday by President Donald Trump, rattling investors who had anticipated that better progress toward a near-term resolution between the two superpowers was at hand. The uncertainty around those ongoing talks continues to push risk markets, including stocks and commodities, mostly lower.
Meanwhile, Iran said Wednesday it would stop complying with some of its commitments under the 2015 nuclear deal, escalating tensions with the U.S. and moving closer to a breakdown of the landmark accord. The U.S. deployed four B-52 bombers to the Middle East, in response to what the Trump administration said are threats of a possible attack by Iran on American troops in the region, according to CBS News.
Back in the U.S., the EIA raised its forecasts for oil prices and domestic crude production for this year and next, according to the monthly Short-term Energy Outlook report released Tuesday.
Rounding out trading on Nymex, June natural gas NGM19, +2.72% climbed 7 cents, or 2.7%, to $2.607 per million British thermal units.
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